The Europe-5 markets comprise the top five economies in Europe — in order of size, those are Germany, the UK, France, Italy, and Spain. In 2022, total retail sales for the Europe-5 countries continued to grow strongly, but this growth actually shifted from online channels and touchpoints to offline channels and touchpoints.
You read that right: After strong growth in 2020 and 2021, online retail sales saw negative growth during 2022. This is probably the first time in modern retail history when online retail sales shrank. So how does the future look? The fundamental growth drivers of online retail remain strong: lower prices, greater product selection, faster delivery, and increased transaction convenience. As such, we expect Europe-5 online retail sales to grow at pre-pandemic levels from 2023 onward.
Specifically, we see the following growth trends for Europe-5 retail sales:
- Europe-5 total retail sales. In 2021, total retail sales in Europe-5 rebounded strongly after negative growth in 2020. This strong growth continued in 2022, if primarily driven by inflation. From 2023 onward, Forrester expects total retail sales in Europe-5 to grow at pre-pandemic levels. Overall, we expect total retail sales of Europe-5 countries to increase from €2.2 trillion in 2022 to €2.5 trillion in 2027 at a five-year compound annual growth rate (CAGR) of 2.6%.
- Europe-5 online retail sales. In 2020, Europe-5 online retail sales grew strongly during the pandemic lockdowns. In 2021, growth remained higher than pre-pandemic — but in 2022, online retail sales saw negative growth. Forrester expects online retail sales growth to rebound to pre-pandemic levels in 2023 and thereafter. Overall, we forecast that the combined online retail sales in Europe-5 countries will increase from €355 billion in 2022 to €553 billion in 2027 at a five-year CAGR of 9.3%.
- Europe-5 offline retail sales. Historically, Europe-5 offline retail sales growth has lagged online retail sales growth because of the strong drivers for online retail and low base effect. Not surprisingly, in 2020, offline retail sales saw large negative growth from the lockdowns. Growth rebounded in 2021 to reach pre-pandemic levels. 2022 was the first year when offline retail growth outpaced online retail growth as more consumers shopped in stores. Forrester expects offline retail sales growth to return to pre-pandemic levels in 2023 and thereafter. We expect combined offline retail sales in Europe-5 countries to grow from €1.9 trillion in 2022 to €2.0 trillion in 2027 at a five-year CAGR of 1.1%.
The Europe-5 economic environment remains challenging. After negative real GDP growth in 2020, the Europe-5 economies rebounded strongly in 2021 to pre-COVID-19 levels. Some economies are still recovering, however, as their real GDP in 2022 remains below 2019 levels. The risk of a global recession in 2023 is increasing as central banks around the world hike interest rates to cool inflation. A slowing economy will impact consumer retail spending, as well.
Moreover, higher inflation levels will continue to impact consumer discretionary budgets, as consumers will spend more on essentials. In 2023, the International Monetary Fund (IMF) expects headline inflation to still be higher than a target rate of 2% for many countries even in 2024 (see figure below).
Our newly published Europe-5 Online Retail Forecast, 2022 To 2027 provides a five-year forecast for total retail sales, online retail sales, and online retail penetration of 22 product categories for each of the Europe-5 economies, with historical data going back to 2002.
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